J.P. Morgan adds Siemens to Positive Catalyst Watch, as €40 bln stake looms

Investing.com -- J.P. Morgan has placed Siemens (ETR:SIEGn) on its ‘Positive Catalyst Watch’ list ahead of the company’s Capital Markets Day scheduled for Dec. 9. 

Shares of the German company were up 1.5% at 05:38 ET (09:38 GMT).

The brokerage said the designation reflects expectations that Siemens will address the future of its 73% stake in Siemens Healthineers, valued at about €40 billion, and mark the final step in a restructuring that has lasted nearly a decade .

The research note, dated Thursday, said Siemens’ portfolio simplification that began with its “fleet of ships” strategy is nearly complete.

J.P. Morgan said the process, though lengthy, has produced a business with higher margins, stronger growth prospects and more predictable free cash flow. 

The brokerage raised its price target for Siemens to €300 by December 2026, about 30% above the Aug. 27 closing price of €232.55, and moved its stock rating to overweight from not rated .

The report outlined several potential outcomes for the Healthineers stake. A full dividend-in-kind distribution of Siemens’ entire holding was described as the most value-enhancing option but unlikely. 

Other scenarios included reducing the stake below 50% through block sales to fund buybacks or distributing two-thirds of the holding as a dividend-in-kind. 

The brokerage said a reduction below 50% without a larger step would be poorly received, while a partial distribution would improve valuation multiples while retaining flexibility.

On credit, J.P. Morgan maintained an underweight stance. The note said a full divestment of Healthineers would reduce diversification and lower both industrial profit and group free cash flow by about 25% in the short term. 

At the same time, such a move would cut reported industrial leverage close to zero by removing about €13 billion of Healthineers’ net debt.

Siemens’ shares have advanced 24.7% year to date and 40.4% over the past 12 months. Revenue for fiscal 2024 was €75.9 billion and is projected to rise to €88.2 billion in fiscal 2027. 

Adjusted EBIT is forecast to increase from €10.6 billion in 2024 to €14.5 billion in 2027, with margins expanding from 14% to 16.4% during the period. 

Adjusted net income is expected to grow from €9.1 billion to €11.6 billion over the same span .

J.P. Morgan said Siemens’ strong positions in automation, software, electrification and mobility leave it positioned for above-average growth in the sector. 

The brokerage added Siemens to its Analyst Focus List alongside the Positive Catalyst Watch designation.